A Private Not-For-Profit Entity Estimated Its Allowance for Contractual Adjustment

question 26

Multiple Choice

A private not-for-profit entity estimated its Allowance for Contractual Adjustment. During the next year,the hospital found that the actual total of contractual adjustments applied to receivables on hand at the end of the previous year was $ 5,000 higher than the estimate. How should the difference be reported?

• A) The hospital should reduce current period net patient service revenues for the $5,000.
• B) The hospital should make a prior period adjustment to retained earnings for $5,000.
• C) The hospital should record a current period expense for the $5,000.
• D) The hospital should record a "cumulative effect of a change in accounting principle" for the $5,000.

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Definitions:

Organ Systems

Groups of organs working together to perform complex functions necessary for the survival and homeostasis of an organism.

Embryonic

Relating to the earliest stages of development in living organisms before birth or hatching.

Implantation

Attachment of the blastocyst to the endometrium of the uterus, occurring 6 or 7 days after fertilization of the ovum.

Human Embryo

An early developmental stage of human growth and differentiation, starting from fertilization to the eighth week, where major organs and structures begin to form.